finance

Insurance:- not an investment tool! 

We all are aware about term ‘insurance’. It is the way to protect ourself from any financial losses. It is a type of risk management where a person, known as insured, buys insurance from an insurance company called insurer. Today we have generally two type of insurance, one is life insurance and other is general insurance. 

Life insurance gives assurance to the person’s life. In simple terms, an insured person or his family gets claim when an insured person gets expired or when insurance gets matured; whichever is earlier. 

On the other hand, general insurance is the way of giving financial protection to anything other than life. Means you can buy insurance of your vehicles, home, any equipment, etc. Companies provide you various types of insurance at different terms and conditions. So it is very important to properly verify each terms before buying an insurance. After every specified period, say 1 year or 6 months, you have to renew the insurance by paying premium. 

So these are the general explanation of term ‘insurance’. Now coming to the point. I just want to tell or say,  aware to all that insurance is not a way of investment. 

Investment always assure you that after a certain period, you will get the principal amount plus certain reward for foregoing that principal money which can be used anywhere. That reward can be interest, dividend, royalty, etc. Whereas insurance does not carry such terms. It will give you financial protection. 

However some insurance give certain amount of interest, which is generally very low as compared to the premium you pay. 

So if you want to invest, then there are many other ways for it. But if you want assurance of your life, or want to protect your vehicles or any other expensive items, then buy good insurance policy. And do not forget to compare different policies and their terms and conditions. 

In crux, if i tell the difference between insurance and investment, then always remember this example:

Buying a car is an investment,

 and, 

to protect your car from any financial losses due to accident, etc, what you buy is insurance! 

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